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Social Studies, 03.05.2020 14:01 shelly30

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3. In Country A, the required reserve ratio is 10 percent. Assume the Federal Reserve (the central bank) buys $10 million in government securities in the open market.

A. Calculate each of the following
(i) The total maximum possible increase in the money supply
(ii) The total maximum increase in loans (this is not the same answer as for (i))
(iii) The maximum possible increase in reserves
(Clue if you add your answers to (ii) and (iii) together, they will equal the answer to (i))

~Sanjith U. (AP Macroeconomics)

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